An appraiser is classifying two otherwise similar mid-rise dwellings by form of ownership. Dwelling A is Unit 12A, with a recorded deed to the individual unit plus an undivided interest in common elements. Dwelling B is Apt 12A, where a corporation holds title to the building and land and the occupant holds shares plus a proprietary lease. Under Fannie Mae Selling Guide B4-2.1-01 and related condominium and co-op definitions, how is each dwelling classified?
Correct Answer
D) A is condominium; B is cooperative
A has a deed to an individual unit with an undivided common-element interest, the stated condominium arrangement. B has shares in the corporation holding title plus a proprietary lease, the cooperative arrangement. Numbered units or mid-rise form alone do not establish ownership type. Analyze the actual instruments and applicable project requirements.
Why This Is the Correct Answer
Option D is correct because Dwelling A has a recorded deed to the individual unit with an undivided interest in common elements, which is condominium ownership. Dwelling B's occupant holds shares in the corporation that owns the building and land plus a proprietary lease, which is cooperative ownership. Physical form and unit numbers do not decide the classification; the ownership instruments do.
Why the Other Options Are Wrong
Option A: A and B are condominiums
Option A, both condominiums, misclassifies Dwelling B. B's occupant has shares and a proprietary lease rather than a deed to the unit, which is a cooperative.
Option B: A is cooperative; B is condominium
Option B, A cooperative and B condominium, reverses the two. A's deed to a unit is condominium ownership, and B's shares plus proprietary lease are cooperative ownership.
Option C: A and B are cooperatives
Option C, both cooperatives, misclassifies Dwelling A. A has a recorded deed to its own unit plus an undivided common-element interest, which is a condominium.
Deed for condo, shares for co-op
A condo buyer gets a deed to the unit. A co-op buyer gets shares and a lease.
How to use: Use this to classify an ownership form from how title is held.
Exam Tip
Ignore building height or unit numbering and focus on what the occupant actually owns. Shares plus a proprietary lease point to a cooperative.
Common Mistakes to Avoid
- -Classifying ownership by building type instead of legal documents
- -Thinking a cooperative owner receives a deed to the unit
- -Mixing condominium and cooperative sales as comparables without analysis
Concept Deep Dive
Analysis
This question tests the legal difference between condominium and cooperative ownership. A condominium owner holds title to an individual unit plus an undivided interest in common elements. A cooperative occupant holds shares in a corporation that owns the building and land, plus a proprietary lease.
Background Knowledge
In a condominium, owners hold fee simple title to their units and shared interests in common areas managed by an association. In a cooperative, a corporation holds title to the real estate and occupants own shares that carry a proprietary lease to a unit. Appraisers identify the ownership form from the actual documents because it affects the rights appraised and data selection.
Real-World Application
An appraiser receives two assignments in the same mid-rise neighborhood. One unit transfers by deed and is part of an association; the other transfers by sale of corporation shares with a proprietary lease. The appraiser identifies one as a condominium and the other as a cooperative and selects comparables accordingly.
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